What Is No-Fault Auto Insurance?

No fault auto insurance is a term that confuses many Americans, and there are a number of states where no fault car insurance is offered. These states are Washington D.C., Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. If you live in one of these areas then it is imperative that you understand what no fault car insurance is and what it means to you and your auto insurance coverage. No fault auto insurance is actually a misleading term, because there may be fault determined. What no fault actually means is that drivers are legally required to keep car insurance on their vehicle at all times to protect themselves, and there are limits on when a lawsuit may be filed because of damages arising from an accident or claim.

No fault car insurance requires that you receive damages up to your auto insurance policy coverage limit from your own vehicle insurance company if you file a claim, instead of the other driver's car insurance company, no matter who was at fault, with the reasoning that your auto insurance carrier will be more receptive to your needs if a claim arises. Usually you can only recover a maximum of five hundred dollars if the other driver was at fault, because this amount will cover the cost of the normal deductible. To recover this amount from the at fault driver's car insurance company, you must file a mini torte with them. Usually the claim is investigated and paid within weeks, sometimes days, depending on the customer service of the auto insurance carrier. If you live in a no fault state and your vehicle is worth more than five hundred dollars, it is a good idea to carry full coverage vehicle insurance to ensure you are protected in the event of a claim.

No fault car insurance coverage is actually a combination of the standard liability system, which makes the driver at fault completely responsible for damages they cause, and the no fault system, which holds that there is no fault. Even with no fault auto insurance there may be fault assigned by the police or courts, and if you are found at fault then your vehicle insurance rates may rise because of this. It is important to understand the consequences if you live in an area that has no fault auto insurance, because if you choose liability only and your car is totaled through no fault of your own, you are severely limited in the amount of damages you can collect.

The exception to this rule in many no fault car insurance states is if your car is parked and not occupied when it is hit. Under this exception to no fault car insurance, this would be covered under the property damage coverage of your auto insurance policy instead of the collision coverage. It is always a good idea to have full coverage car insurance unless you drive a junker, especially if you live in an area where no fault car insurance is the law.